Understanding Facilities and Administration FA Costs Also known

Understanding Facilities and Administration (F&A) Costs Also known as Overhead Costs, or Indirect Costs. Revised April 2017 1

Welcome! Presenters: Matt Michener matthew. michener@wsu. edu Grant and Contract Coordinator Lead, Office of Research 509 -335 -1960 Karen Breese kbreese@wsu. edu F&A Cost Specialist, Business Services 509 -335 -2056 2

F&A Topics • What are "Facilities & Administrative" or overhead costs? Let's discuss: • Source of terminology, definitions and guidance. • How does the F&A rate impact WSU? • Distribution of F&A returns, i. e. recoveries • Please ask Questions 3

Total Direct Costs – recorded in WSU accounting for a Sponsored Project Direct Expenses: Salaries & Wages Fringe benefits Services Supplies Travel Equipment Subcontracts Interest Rent Utilities 4

Indirect Costs – Not specific to a sponsored project. Examples: Utilities Building Maintenance Building Depreciation Care of WSU grounds Custodial 5

What are F&A Costs? Incurred for common or joint objectives; Identifiable at a high level, but not easily identifiable at a project or activity level; and Benefit the total institution. 6

For Research at WSU For Other Sponsored Activities And 7

Organized Research Separately budgeted “Project" accounts to record the activity for our sponsors: §Federal government, §State governments § Corporations, Foundations, Businesses 8

Cost Sharing – University Costs towards the Project All contributions towards accomplishing a sponsored project, including Cash and In-kind. Also called WSU’s ‘Match’ Personnel Costs are generally the majority of Cash Costs (Cost Share) borne by the University. Necessary, Allowable, Verifiable and Measurable Resources used. 9

Calculating the Base for the F&A Rate Modified Total Direct Cost (MTDC) MTDC include Total Direct Costs minus: • Cost of equipment • Buildings • Patient care • Off-campus rents • Training Stipends • Student Tuition / Scholarships and • Sub-contracts over $25, 000 Includes cost sharing in Organized Research Question for the Audience: Does Cost Share help our F&A Rate? 10

Calculation of Research F&A Rate All direct (MTDC) expenses related to organized research Sponsored project costs Committed Cost Sharing Overdrafts 11

Sponsored Project – Example – Budget Statement 12

Sponsored Project – Example View in AIS: 13

Simple Sponsored Program Project Example One Project’s MTDC: Total Direct Costs: § Salaries/benefits: § Supplies: § Scholarships: § Capital Equipment: $130, 000 $95, 000 $10, 000 $20, 000 Modified Total Direct Costs = ? 14

Simple Sponsored Program Project continued Total Direct Costs: § Salaries/benefits: § Supplies: § Scholarships: § Capital Equipment: $130, 000 $95, 000 $10, 000 $20, 000 Modified Total Direct Costs: = $130, 000 - $10, 000 - $20, 000 = $100, 000 MTDC 15

Rate 52% Rate $52 $100 Example F&A Rate 16

Simple Sponsored Program Project continued Modified Total Direct Costs = $100, 000 • Accounting System (the mainframe) calculates and applies the 52% F&A Rate When the project’s rate is Organized Research 52% And • Posts the F&A Expense to ‘Object 13. ’ • Sponsored Programs personnel periodically review and confirm. 17

What is the context – Why is there F&A? Within the University – Various Projects 18

Why are there F&A Rates? To formalize reimbursement of University overhead costs from sponsors of research, instruction and training. Context: Federal Cost Accounting Reference: Uniform Guidance subsection B. 1 19

Example: A lab is used in several projects. • If records could finitely track–then we could differentiate between the uses. Estimation is used when it is not possible to track: • Joint Costs are pooled and allocated. F&A costs are not charged as a direct cost. How are F&A costs handled? • Calculated indirectly to represent a return or recovery of costs already incurred by the institution. 20

Direct Costs that can be identified specifically with a particular project. or activity, or Direct Costs – Costs can be directly assigned to an activity with relative ease and a high degree of accuracy. 22

Serving Washington and the World Many Locations, Many Activities 24

What are Examples of F&A Costs? • Janitorial Services • Minor Repairs and Renovation • Buildings & Grounds Maintenance • Physical Plant • Environmental Safety • Facility Planning • Utilities 23

What are F&A Costs? • Research Compliance • Animal Care Review • Human Subjects Review • Office of Research Operations and Support • Sponsored Programs Services • Purchasing • Payroll • Human Resources • Accounts Payable • General Accounting 24

What is an F&A Rate? • A percentage. • Ratio of the Indirect portion to the Direct costs. If the F&A rate is 50% for every $1 spent on research § 50 cents of cost is incurred by the University. • Why don’t we charge the sponsor 50 cents directly? F&A is difficult to estimate project-by-project. The F&A agreement establishes that the federal government or sponsor will pay its fair share of total costs. 25

FY 2017 F&A Rates FY 17 On-Campus Research 52% Off-Campus Research 26% On-Campus Instruction 57. 5% Off-Campus Instruction 26% On-Campus Other 36% Off-Campus Other 26% 26

WSU negotiated F&A Rates From To Rate Location Applicable To 7/1/15 6/30/16 51% On-Campus Organized Research 7/1/16 6/30/17 52% On-Campus Organized Research 6/30/19 53% 7/1/15 6/30/19 26% Off-Campus Organized Research 7/1/15 6/30/19 36% On-Campus Other Sponsored Activity 7/1/15 6/30/19 26% Off-Campus Other Sponsored Activity 7/1/19 Until Amended 7/1/17 On-Campus Organized Research Use same rate & conditions cited for FY 6/30/2019 27

Cost Accounting Standards Consistency Reasonable Allowable Allocable Context: Federal Cost Accounting 28

How is the F&A Rate calculated? Institutions that wish to be reimbursed for Facilities and Administrative costs - • Two methods of calculating an F&A rate: Long Form- Required for institutions expending more than $10 million on Federal grants and contracts annually. § Short Form- Simpler allocation methodologies used by institutions that have <$10 mil research expenditures. § 29

Federal Uniform Guidance • Guide to help universities and institutions properly cost projects and calculate F&A costs. Contains the consolidated federal cost principles. • Sets basis (UG, Appendix III to Part 200) • Cost Allowability and • Cost Accounting Standards. • Defines Direct and Indirect (F&A) costs. • Defines methodologies for allocating F&A to direct functions. (Allocating = %) 30

Overall Timeline for F&A Rate process Start of Fiscal Year Space Usage Survey End of Fiscal Year Financial Report F&A process: Calculate & submit. Slide 31

F&A Rate Calculation 1. Start: Operating expenses in financial statement. 2. Adjust to exclude unallowable costs. 3. Map to Federal cost pools/groups and bases. 4. The indirect costs are dependent on dept. personnel providing space utilization, property inventory and other data to allocate: • Building Depreciation • Equipment Depreciation • Operations and Maintenance • Interest 5. Allocate indirect costs to direct cost pools. 6. Lastly, calculate the Indirect Rates. 32

Identify & Group similar activities Uniform Guidance 33

F&A Cost Calculation Total Costs Financial Statement Operating Expenses Exclusions Capitalized Items Federal Expenditures Unallowable Costs Adjustments Less: Credits or Plus: Allowable Interest Modified Total Direct Costs And Add-in any recorded Cost Share. 34

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F&A Costs * Key Rate Components heavily dependent on Department Information: Research rate components Building use Equipment use Operations & Maintenance Interest Library Utilities General Administration Department Administration Sponsored Proj. Administration On Campus 7. 1 points* 2. 6 points* 12. 8 points* 2. 2 points* 0. 6 points 0. 7 points 9. 2 points 14. 2 points* 2. 6 points Total 52 points Total from Key Dept data 38. 9 points* Off Campus 9. 2 14. 2* 2. 6 26. 0 14. 2 Administrative component is capped at 26%. 36

F&A Rate Application Complexities Barriers to charging the full F&A rate • Sponsor limitations: – Example USDA 10% – Ex. Training Grant 8% – Ex. Foundations (common with humanities programs) § TDC Base Know that F&A Waivers are the exception. Question for the Audience: Why? 37

Office of Research F&A Returns Expense to Revenue % Distribution Architectural design view of the PACCAR Inc. (www. paccar. com) Environmental Technology facility, also known as the Clean Technology Lab Building, occupancy started in October 2015. 38

Is F&A Important to Me? • Where does my paycheck come from? • What is the source of funds for the Building Utilities? • How are Support Staff paid? • How are costs for shared purposes tied to the benefiting functions? • What funding supports Research Infrastructure? 39

F&A Allocations F&A Splits Contact Pete Beeson Budget Office 5 -9683 40

Why is the F&A rate important? 41

Facilities and Administrative Costs • Incurred for common or joint purposes; • Identifiable at a high level; • Benefiting the total institution. 42

F&A Rate in Action • Projects for external sponsors have direct costs and indirect costs, with Indirects being recovered through an F&A percentage. • F&A recoveries support the University. • QUARTERLY F&A recovery distributions. 43

The F&A rate reimburses WSU. Heavily dependent on our accounting consistency. Ensure that there are no special accounting practices or treatments for sponsored projects – and that all costs are consistently treated. 44

What will have large impact on our next F&A rate negotiation? 45

What will impact our next F&A rate negotiation? § PACCAR and other new research facilities § WSU Spokane and Everett Growth § Grand Challenges and the WSU Research Agenda 46

What are F&A Costs? Facilities Administrative Building & Equipment Dept Utilities College Maintenance Campus Libraries University Pooled Expenses F&A Questions? 47

Federal Uniform Guidance: Direct & Indirect (F&A) Costs Direct – Major Functions F&A (Indirect or Overhead) Instruction/Dept. Research Depreciation Organized Research § 200. 87 Interest Other Sponsored Activity Departmental Administration Other Institutional Activity Operations & Maintenance Library Sponsored Programs Administration General Administration 48

Presenters Matt Michener matthew. michener@wsu. edu Grant and Contract Coordinator Lead, Office of Research 509 -335 -1960 Karen Breese kbreese@wsu. edu F&A Cost Specialist 509 -335 -2056 49

References § § § Uniform Guidance, formerly OMB A-21, Relocated to 2 CFR, Part 220 OMB A-110, Institutions of Higher Education, CFR, Part 215 OMB A-133, Audits of States, Local Governments and Non-Profit Organizations DHHS Division of Cost Allocation College and University Long-Form Guide DHHS Division of Cost Allocation Frequently Asked Questions • State of Washington and WSU: § Bylaws of the Board of Regents of Washington State University & Executive Policy Manual § WSU’s Business Policies and Procedures Manual § State Administrative and Accounting Manual (SAAM) – State of Washington § Division of Cost Allocation [DCA] – Washington Statewide Cost Allocation Plan [SWCAP] § Cost Accounting Standards Disclosure Statement [DS-2] § Current negotiated federal F&A rate agreement(s) between WSU and the Department of Health & Human Services, through WSU’s cognizant negotiation agency: the Division of Cost Allocation § Postsecondary Education Facilities Inventory and Classification Manual, for Room Use codes. 50